Requiem For A Clunker

Today marks the final day of the “Cash For Clunkers” program. The program has been touted as being wildly successful, popular, a brilliant example of the government stimulating the economy, etc. Let’s really look at these claims.

Was it successful? Yes, in the sense that something along the line of half a million new cars were sold (I’ve also seen estimates up to 700,000). But is that really the measure of success?

The program was a government giveaway of taxpayer dollars. The essence of the program was simply this: trade in your old car and the taxpayers of the United States will give you up to $4500 dollars towards the purchase of a new car. The fact that people took advantage of this is about as surprising as the fact that children scrambled to pick up nickels thrown by John D. Rockefeller, and that’s actually one of the pernicious aspects of the program: it treats adults like children being rewarded for cleaning out their garages. The program was popular with those who took advantage of it (and took advantage of other taxpayers, by the way). Why wouldn’t it be? They got free money…and a lot of it. Was it popular with the millions of people who did not participate? I haven’t done surveys, but I’ve asked around. A few people I know think it’s a good idea, but the overwhelming majority of people I’ve spoken with are appalled at the entire concept. Judging the popularity of a money giveaway by the smiling faces of those who received the money is not exactly a fair yardstick.

One of the main reasons for the program was to give a shot in the arm to the failing automakers (GM, Chrysler, Ford) and also promote “green” automobiles, but most of the cars sold were foreign cars and standard internal combustion vehicles, so the program failed on both counts. As far as the environment is concerned, the program was, if anything, anti-environmental.

For starters, the program only applied if you bought a new car. Used cars were not allowed. From an environmental standpoint, the cost of producing a new car is considerably higher than the cost of an existing car in the amounts of energy required. A truly environmental agenda here would have required the participant to buy a pre-existing car. Secondly, the law forced the dealership to destroy the turned-in clunker within 48 hours, despite the fact that these cars could have been sold overseas in developing countries and in places like China where people are desperate for cars. The destruction of the cars uses energy, as well. And since the cars were destroyed, and not even allowed to be dismantled and sold for parts, they deprived the auto dealers of a potentially lucrative source of income. There are also many lower-income people in this country who might have jumped at the opportunity of replacing their clunker with a somewhat better clunker.

You also have what I call the “mortgage paradigm” at work. How many lower income people traded in their clunkers for cars they could not afford because the government was willing to give them so much money? Many considerations go into buying a car: the cost of the car, the cost of insurance, the cost of gas, the mileage, etc. Were there people who bought more car than they needed because the government gave them money? This was what happened with the housing crisis…too many people buying more house than they could afford because interest rates were so low. My guess is that the number of recently purchased cars that end up for sale a year from now will be somewhat higher than normal as people sell off their shiny new Camrys and replace them with…used clunkers.

Then there’s this: the program was announced with great fanfare and was going to cost $1 billion dollars and run from August until November. At the end of the day, the program cost at least $3 billion and ran from August until August. There are other additional costs as well. The government has had to hire people and outsource paperwork. The dealers have been working around the clock to try to keep up with the paperwork on their end (and only about 2% of dealers have gotten their money back). Destroying the cars costs money. Being unable to sell the used clunkers either as cars or as parts is a loss of potential revenue. This program has cost at least three times what the government estimated and has ended two months early even as dealers are starting to pull out of the program on their own.

This “wildly successful” program has been an absolute debacle, a shining example of government causing problems and not solving problems.

And when it comes to putting our nation’s health care system into the same hands that brought us this sham of a program, Barack Obama smiles and says, “Trust me.”

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This entry was posted on Monday, August 24th, 2009 at 4:17 pm and is filed under Politics. You can follow any responses to this entry through the RSS 2.0 feed.
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One Response to Requiem For A Clunker

You nailed that one on the head,I looked into all the aspects of this diservice to the american people prior to it being rolled out. As a matter of fact the collecter car club I belong to advised all its members to fight the bill, that didn’t work. There were holes in this program that I found amusing as the army of sheep marched out and bought new cars because they were getting something for nothing. I actually had a friend of mine tell me that if he couldn’t afford the car in a year or two he could sell it for more than he paid and be ahead of the game…Yeah Ok. If that wasn’t scary enough, there is a car dealer up by me currently under investigation for Clunker fraud, apparently anybody who came in to buy a car also traded in a clunker, even if they already had a trade in, apparently they were cleaning the garbage off of their used car lot and double dipping whenever possible. No wonder I don’t see a half million new cars rolling around, another case of paying for something and not getting it.